'Love Island's Huda, BF Louis Laughing at Fan Calling Olandria N-Word, on Video

"Love Island" star Huda Mustafa's livestream with boyfriend Louis Russell turned ugly when they laughed at a fan calling Olandria Carthen the N-word ... now they're all responding to give their side of the story.

So here's what Huda had to say ... she's claiming she did hear the N-word, but that's all. According to her, she didn't know the unknown caller -- who sounded like a small child -- was using the word to describe Olandria ... but that still begs the question, why did they laugh???

Huda, wrote, "laughter was because it was AWKWARD." Hmmmm...

She added, "I really don't condone racism, which is why it was immediately hung up ... whoever said it is in the wrong."

As for Louis -- in a since-deleted IG story post -- he said that, as a Black man who has experienced bigotry himself, you're dead wrong if you think he condones racism.

He defended himself, writing ... "I don't even wanna give the person that said the slur the satisfaction that they get from this but I have to come here and say something because it wasn't what we heard."

Still seems a little baffling, but no matter what, this is NOT helping Huda beat the allegations she's complicit in her fans' bullying of Olandria online.

In fact, many people on socials have called Huda and Louis out for what they called a "disrespectful" and "tone deaf" reaction.

Olandria responded graciously, directing her followers to the websites for the NAACP, UNCF, and Thurgood Marshall College Fund, writing ... "Words like that carry generations of pain, and pretending otherwise only keeps the cycle going. Defending it, laughing about it, or making excuses is even worse."

She honestly cooked them with that. Well said, sis.

A spokesperson for Thurgood Marshall College Fund tells TMZ that they have received "171 donations for a total of $7,120" -- but they are unable to release specific names of donors.